For families using IVF, surrogacy, and/or egg donors to grow, these services are expensive – anywhere from $20,000 to $200,000. One silver lining is that some parts of the process can be tax deducted – but not for everyone. We’ll break down who and how patients can benefit from tax savings when using assisted reproduction technologies (ART) to build their family.
Unreimbursed medical expenses that make up more than 7.5% of your adjusted gross income (AGI) on your personal tax return can be tax deducted. Let’s break down what that means for you.
Unreimbursed medical expenses, according to the IRS, refer to the costs of diagnosis, cure, mitigation, treatment, or prevention of disease. However, these expenses need to relate to the IRS’s definition of an ‘inability to have children.’
Elements of the IVF process that can be tax deducted, for couples with a diagnosis of infertility, include:
- Egg retrieval
- In vitro fertilization (including temporary storage of eggs or sperm) on your own body
- Breast pumps and supplies
- Lodging and transportation, if essential to medical care
- Therapy as part of a medical treatment
- Premiums you pay for medical insurance
- And more, see the IRS’s Medical and Dental Expenses Report for details
You cannot deduct the following:
- Elements of your journey that are preventative, or not related to a medical ‘inability to have children’. That means same-sex couples who do not have a diagnosis of infertility cannot tax deduct their ART expenses
- Maternity clothes and nutritional supplements
In the case of surrogacy, tax law is not entirely clear on what is an eligible expense to be tax deducted. The expenses incurred using a surrogate are not for medical procedures performed on the bodies of the Intended Parents (the taxpayers) but there is an argument to be made that surrogacy is the procedure being used to treat a medical condition.
In this case, the intended parents could seek to obtain a Private Letter Ruling (PLR) from the IRS. The purpose of the PLR is to get permission from the IRS to deduct specific expenses that are not made clear by law. There have been some cases in which an Intended Parent was able to write off fees associated with finding an egg donor, though every PLR is on a case by case basis and prior PLRs can not be cited for use in future cases.
It is important to note that whether or not you seek to obtain a PLR, all tax deductions for ART procedures must be due to a medical need. We advise that you speak to a CPA to determine your best course of action, they will be able to help you obtain a PLR and determine which expenses would qualify with the IRS.
What is a tax deduction? Also called a write-off, this is something you can subtract from your taxable income that lowers the overall amount of taxes you owe. In other words, it shows the IRS, “I’ve already spent this money, so I don’t need to pay taxes on it.” This “spent” money can refer to your IVF bills.
Let’s look at an example: Vicky and Jason, a Portland-based couple and Sunfish members. As a household, their adjusted gross income (AGI) in 2022 was $90,000. 7.5% of that is $6,750. That means any expenses over $6,750 can be written off on their taxes.
A typical IVF baby can cost around $50,000 (assuming two cycles). So, for Vicky and Jason, everything they spent last year above $6,750 can be written-off—which means they are not paying taxes on $43,000 of last year’s income!
Pro tip: We advise you to seek help from a qualified tax advisor to ensure that you are taking full advantage of all eligible deductions and following tax law. Please confirm the above items on the IRS website as things change annually. A Sunfish Financial advocate can set up a complimentary consultation to help guide patients or intended parents through the financial planning process. Please note we are not a financial advisor and this is not intended to act as financial advice. Sunfish can also help you find a loan or line of credit to spread out payments over time.
Sunfish’s mission is to make the journey to parenthood financially attainable for everyone. Our goal is to democratize access to the family building resources that historically have only been available to those with large financial resources. Contact us at email@example.com for more information.